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Delta's Smooth Flight So Far in 4Q17

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Delta's Smooth Flight So Far in 4Q17 PART 1 OF 5

Delta Air Lines Capacity Growth on Track to Meet 2017 Guidance

Capacity growth

In November 2017, Delta Air Lines’ (DAL) capacity grew 2.9% YoY (year-over-year) to ~18.9 billion miles. YTD (year-to-date), the carrier’s capacity has risen 1.0% to ~234.5 billion miles. Delta has given a guidance of 0%–1% capacity growth for 2017.

Delta Air Lines Capacity Growth on Track to Meet 2017 Guidance

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Domestic demand remains strong

Continuing with its past trend, Delta has added capacity in the domestic region, given the higher yields. Delta’s domestic market capacity grew 4.0% YoY in November. YTD, its domestic capacity has risen at a rate of 2.7% YoY.

Notably, peers United Continental (UAL), Alaska Air Group (ALK), and American Airlines (AAL) have not yet reported their November 2017 results.

International capacity clocks slight growth

Delta has been reducing its international capacity, however, due to lower yields. Still, for November, its international capacity recorded a slight growth of 0.9% YoY.

Despite this slight growth, Delta’s international capacity has mainly been on a declining trend. YTD, DAL’s international capacity has fallen 1.7% YoY. Most of this was contributed by the Pacific region, where capacity has fallen 8.3% YTD. The Atlantic region’s capacity was almost flat at 0.2% YoY, while Latin American capacity grew 1.8% YoY during the same period.

Outlook

According to its 3Q17 earnings release, Delta expects capacity growth of ~2% for 4Q17. In the first two months of the quarter, the airline saw an average growth of 3.0% YoY. This means that investors can likely expect slower capacity growth for the next month.

Investors can gain exposure to Delta Air Lines by investing in the PowerShares BuyBack Achievers Portfolio (PKW), which has 1.5% of its holdings in DAL.

In the next part of this series, we’ll look at Delta’s demand growth in November.

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